Households with income under $20,000 saw their earnings increase by only one-third of their cost of living increase in 2021.
It has been said that it’s a lot easier to become rich by starting rich than by starting poor. That has now been confirmed by a Penn Wharton Budget Model report.
It showed that employed households with income under $20,000 saw their earnings increase by only one-third of their cost of living increase in 2021.
Their median increase in costs totaled $1,837 for October, November and December of last year, compared to a $578 increase in earnings.
At the other end of the spectrum, for households with income of $150,000 and up, earnings rose $7,431, easily topping the $5,483 increase in costs.
Shutterstock
For those earnings $20,000 to $39,999 earnings increases barely exceeded cost increases. For those earning $40,000 to $59,999, cost increases beat earnings increases. For those earning $60,000 to $149,999, earnings increases beat cost increases.
For the 25% of workers with the lowest wages, earnings growth rose from 4% at the end of 2020 to nearly 6.5% the end of 2021, the study said. By contrast, hourly earnings growth for the highest-paid workers stagnated in 2021.
So Why Didn’t Wages Keep Up With Inflation?“First, lower-wage workers saw faster wage growth but from a much smaller base, meaning that their wages did not increase as much in dollar terms as higher-wage workers,” the study said.
“Second, lower-wage workers were less likely to be consistently employed throughout the year and more likely to work part time in 2021. So the increase in hourly wages applied to fewer hours of work. Workers in high-income households were more likely to remain employed and to work full time.”